Monday, March 4, 2024

Judiciary and the Economy

In India, the importance and need for economic impact analysis in judicial decisions have been increasingly recognised. A new report looks at “selected decisions” of the Supreme Court and the National Green Tribunal and comes up with some troubling revelations about the economic impact of the last three years

A report commissioned by NITI Aayog, titled “Economic Impact of Select Decisions of the Supreme Court and National Green Tribunal”, has estimated that during the three years from mid-2018 to mid-2021 at least around 75,000 persons were adversely impacted and around 16,000 workers lost their jobs. The government did not receive revenue of around Rs 8,000 crore, which if received and invested as capital expenditure could have resulted in the economic impact of more than Rs 20,000 crore. The industry lost close to Rs 15,000 crore in revenue, and workers lost around Rs 500 crore of income during the same period. The economic impact owing to inability of relevant governments to make capital expenditure is estimated to be around Rs 18 crore per day. During this period, the impact on industry is estimated to be around Rs 13 crore per day. 

In India, the importance and need for economic impact analysis in judicial decisions have been increasingly recognised over the past few years. Justices AK Sikri and AM Sapre in Shivshakti Sugars Ltd vs Shree Renuka Sugar Ltd., (2017) 7 SCC 729 (Shivshakti case), on May 9, 2017, observed that economic evidence is crucial in environmental matters. 

The study by the NITI Aayog attempted to understand the first-order direct economic impact of the selected five judicial decisions of the Supreme Court and the National Green Tribunal on the economy and stakeholders. These are:

1. The Goa Foundation vs M/s Sesa Sterlite Ltd & Ors (Goa mining case)

Iron ore has been a mineral of economic significance for Goa since the 1950s. However, around the late-2000s, concerns of environmental violations and illegal mining in Goa surfaced. Consequently, the government of Goa (GoG) suspended all mining operations on September 10, 2012, after the Justice MB Shah Commission tabled its report in Parliament on illegal mining in Goa. 

On April 21, 2014, the Supreme Court, on a petition by Goa Foundation, a civil society group, ruled that all the mining leases had expired on November 20, 2007, and thus, all the mining operations since then were illegal. However, the mining activities were restarted in 2016, after the GOG granted second renewals to 88 mining leases, following an order by the Bombay High Court. These renewals were also set aside by the Supreme Court on February 7, 2018, and termed illegal, thus suspending the mining operations for the second time with effect from March 16, 2018. In the bargain, the mining suspension resulted in economic and job losses to the mining companies, dependents, service providers and the state exchequer.

The report concludes that with respect to the matter in its current form, both the iron ore mining suspensions in Goa were completely avoidable. The GoG failed to act judiciously in mitigating the environmental violations that were being reported in mid to late 2000s as well as granting of second renewals on time (before 2007). Although, the Supreme Court termed mining illegal from 2007 to 2011, but considering the significance of mining for Goa and livelihood concerns, the Court directed the state to issue fresh mining leases, as a matter of state policy. 

“While quashing 88 mining leases, the SC could have directed GoG to restart mining operations within a stipulated time under the court’s supervision and facilitated by a committee of subject experts, including economists, environmentalists, etc. Such an approach could have been informed by an exante impact analysis of the mining suspension, initiated and supervised by the SC itself. The analysis could have also explored the best possible environmental protection measures to keep the damage to the minimum. It could have mitigated or lessened the adverse impact on many key stakeholders, especially the livelihood of many mining dependents, ensured economic progress while preserving environmental and intergenerational equity. A balanced and informed approach to development, society and environment would ensure sustainable development, wherein public institutions such as the SC increasingly play a crucial role,” said the report.

2. Hanuman Laxman Aroskar vs Union of India (Mopa Airport case) 

In 2015, GoG received Environmental Clearance (EC) from the Union ministry of environment towards the development of a second international airport in Mopa, Goa, as the existing Dabolim airport in Goa was saturated. In 2017, the EC was first challenged before the National Green Tribunal by Hanuman Laxman Aroskar and the Federation of Rainbow Warriors, which was upheld by the Tribunal in 2018. The petitioners then appealed to the Supreme Court against the Tribunal’s order. On March 29, 2019, the Supreme Court suspended the EC, thereby the construction of Mopa Airport, and ordered the Expert Appraisal Committee (EAC) to revisit the environmental concerns that were highlighted by the apex court.

The report concludes that the delay in the construction of the Mopa Airport and the suspension of EC was avoidable had GoG made all relevant and necessary disclosures in Form-1 as provided in Environmental Impact Assessment (EIA) Notification, 2006. Thus, it is imperative to fix accountability of agencies/officials involved in the EIA process. An accountable, transparent and effective governance structure would reduce such avoidable litigations.

During the EC appraisal process and judicial challenge, the EAC and NGT failed to discover the concealment of facts by GoG. The shortcomings/loopholes in the appraisal process had a cascading effect on the outcome, including wastage of time, resources and capital. Thus, EIA Notification 2006 must be implemented in letter and spirit and loopholes should be plugged.

“Similarly, it is important to review the role of EAC to ensure their ability to critically appraise environmental facets of the projects, while NGT must engage a critical review of merits. Projects such as the Mopa Airport involve numerous stakeholders and high capital with a potential of adverse economic impact. Thus, it is essential to record and address stakeholders’ concerns, if any, on the project in a time bound manner. Most importantly, SC must institutionalise a screening mechanism to prioritise listing of cases with economic significance to ensure expedited adjudication and pre-empt avoidable delays and economic losses, as in the Mopa airport case,” the report said.

3. The Tamil Nadu Pollution Control Board vs Sterlite Industries (I) Ltd (Sterlite Copper Plant case)

Ever since the establishment of the copper plant in 1994, its journey has been dogged by protests, public uproar, regulatory scrutiny, executive actions, and judicial interventions emanating from various claims against the copper plant flouting environmental norms and adversely impacting the health of the local inhabitants. After the biggest protest—which lasted for 100 days—which turned violent in May 2018, the Tamil Nadu Pollution Control Board (TNPCB) and the Tamil Nadu government ordered the permanent closure of the copper plant with immediate effect. 

When the orders were challenged before the National Green Tribunal, in November 2018, the Tribunal ordered the reopening of the copper plant. However, the same was dismissed by the Supreme Court in 2019, stating that the Tribunal had no jurisdiction to entertain appeals against state government’s orders. Consequently, the matter went before the Madras High Court, which in August 2020 confirmed the orders of the TNPCB and Tamil Nadu government.

In December 2020, the Supreme Court  denied any interim relief to Sterlite. However, most recently in May 2021, during the peak of the second wave of the Covid-19 pandemic in India, the copper plant was allowed to reopen for the production of medical oxygen. More recently, a group of fishermen and a few villages have petitioned the state government, requesting to reopen the plant as it was a major source of their income and livelihood.

According to the report: “One of the biggest impacts because of the closure of the Copper Plant was (and continues to be) faced by the workers/employees of the Copper Plant. Various media reports highlighted that the net loss of employment (both direct and indirect) comes to almost 30,000 jobs. Moreover, the closure is estimated to have significantly impacted the incomes of the people who lost their jobs, reducing their monthly incomes by at least 50% while rendering many jobless”. 

In terms of the downstream businesses’ dependent on the plant, various media articles reported that around 400 downstream businesses were associated with the copper plant, employing approximately 1,00,000 people. The net estimated impact on all the downstream businesses in terms of their cost of procurement stands at around Rs 491 crore since the closure, the reports says. 

The copper plant, contributing close to 40% of copper production in India and its closure, has amounted to significant losses in terms of foreign exchange, cutting down the country’s net production by 46.1%. The consolidated loss to the economy owing to closure of the copper plant on all stakeholders is estimated to be around Rs 14,749 crore since its closure in May 2018.

4. National Green Tribunal Bar Association vs Ministry of Environment & Forests and Ors (sand mining case) 

In 2012, the Supreme Court in Deepak Kumar vs State of Haryana mandated that leases of all minor minerals for an area with less than 05 ha will be granted only after environmental clearance by the Ministry of Environment, Forest and Climate Change (MoEFCC). Prior to this judgment, MoEFCC issued the Environment Impact Assessment Notification in 2006 according to which EC was required only for mining projects with lease area of 05 ha and above, irrespective of minor or major mineral, and not for mining projects with lesser areas. 

Following the Supreme Court judgment in 2012, the NGT on August 5, 2013 ordered that “no person, company, or authority can carry out any mining activity or removal of sand from any riverbed anywhere in the country until an EC from MoEFCC/ State Environmental Impact Assessment Committee (SEIAA) and licence from competent authorities have been obtained”.

The economic Impact was significant. The state of UP was deprived of Rs 477.93 crore in 2015-16 because of unauthorised mining operations according to Comptroller and Auditor General of India’s (CAG) audit report of the revenue sector of the state. Moreover, it was also noted in the report that the government suffered a loss of Rs 179.57 crore owing to extraction of minerals without ECs. On top of all this, a penalty of Rs 282.22 crore was also not recovered by the government against lessees extracting minerals without the renewal of a mining plan in addition to over-extraction beyond the approved quantity. The state government on an average suffered an estimated annual loss of Rs 3.68 crore in royalty earnings from sand mining in Gautam Buddha Nagar, adding up to an estimated total royalty loss of Rs 12.88 crore during the assessment period—from August 2013 to September 2017.

5. Vardhman Kaushik vs Union of India & Ors (NCR construction ban case)

In 2014, a PIL related to the toxic air of Delhi and its neighbouring region was filed before the NGT by a Supreme Court lawyer, as he felt that the increasing pollution can be a serious health hazard. The litigation originated from the problem of pollution in Delhi-NCR and the failure of the administrative authorities to keep a check on the construction activities that were in violation of the MOEF guidelines and causing pollution. For addressing the mentioned issue, an order was passed on April 7, 2015, by NGT directing the concerned authorities to stop construction activities on a two-kilometre stretch from NH-24 to Charmurti Chowk in Noida Extension and on Golf Course Road, Gurgaon. 

It is stated in the report that the real estate sector is directly impacted by the stoppage of construction activities, which adversely impacts labourers working on the site as well as homebuyers who invest their hard-earned money.

“The ineffectiveness of procedures adopted by the judiciary and the executive in curbing pollution highlights the existence of loopholes in set procedures and systems owing to various reasons such as capacity and expertise constraints, paucity of resources, etc. Various authorities and departments, due to constraints faced and no clear division of responsibilities, have failed to ensure proper implementation and compliance of the guidelines and orders. Thus, the executive and the judiciary urgently need to come up with frameworks that would consist of effective measures and the proper system that would ensure the compliance of the guidelines and regulations passed,” the report reads. 

—By Shivam Sharma and India Legal Bureau


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